Enron's Skilling: 'I am absolutely innocent'

THE ENRON TRIALFormer CEO Skilling tells his side of story

MARY FLOOD, Copyright 2006 Houston Chronicle

Published 5:30 am, Monday, April 10, 2006

Jeff Skilling took jurors on the roller coaster ride of his Enron career Monday from the highs of creating a new business to the lows of his depression and powerlessness as the company slid into a death spiral while he watched from the outside.

The 52-year-old former CEO testified about how proud and preoccupied he was with Enron, a company he thought was strong and healthy when he announced his sudden resignation in August 2001 because he wanted to get balance in his life and felt his Wall Street credibility had waned.

He bragged about being a creative force at Enron, where he loved walking in the front door and "feeling the excitement." And Skilling said that in hindsight he regrets his resignation because it might have contributed to the company's demise.

"The effort that goes into creating a company like that, the time that you spend and I guess partly my personality . . . I was immersed in Enron, some people would say I was obsessed with Enron," said the Houston man facing 28 counts of conspiracy, fraud and insider trading.

But he said his life got "out of whack."

"I was tired, I was exhausted. I'd put so much of my life into it. Every day was intense, and I had not spent the time I should have spent with my family, I did not spend the time I should have spent in the community," he said of his decision to leave.

In a gray suit, white shirt and blue tie, Skilling spent most of the day on the stand answering questions from his lawyer Daniel Petrocelli. Occasionally, he became professorial as he walked the 12 jurors and four alternates through a half-dozen color charts about Enron's business.

Though he started by telling the jurors he was nervous because "in some ways my life is on the line," his comfort level accelerated throughout the day. In the afternoon he was so relaxed he even asked the judge an esoteric question, casually trying to double check something about Mexican or South American power plants. U.S. District Judge Sim Lake put his hands up to indicate he wasn't prepared to answer.

The jury never seemed quite mesmerized by Skilling. But especially during his afternoon tutorial on business, the panel was definitely engaged. They took a lot of notes and sometimes craned to see the charts he used.

"I'm absolutely innocent," Skilling stated emphatically when he first took the stand mid-morning. He said he will "fight the charges till the day I die." And he said he believed many of the prosecution witnesses who pleaded guilty and testified against him really are innocent too.

He told Petrocelli that he would not have predicted the company's downfall "in my wildest dreams. It's almost inconceivable now what has happened."

And when asked how he felt, watching TV images of his ex-employees carrying boxes out of the Enron building he said: "You want to die."

Skilling maintained that he knew of no fraud at Enron and in fact encouraged now-disgraced ex-CFO Andrew Fastow to tell all publicly because Skilling thought Fastow's side deals were on the up and up.

"I know of no reason why Enron needed to resort to fraud in 1999 or any other year," Skilling replied when Petrcoelli asked if he knew of a justification for the fraud the Enron Task Force alleges was committed in 1999, 2000 and 2001.

He said that mid-August 2001 was not the first time he'd talked to codefendant Ken Lay about resigning though. Skilling said after his 2000 trip to Africa, he told Lay he "hated his job." This was one of several times when the two codefendants shared knowing smiles throughout the day.

Skilling also said he drafted a resignation letter in April 2001 but it wasn't until the "fateful Friday 13th" in August 2001 that he said he was tired of his job for sure, had become a "lightening rod" for problems from the California energy crisis and had lost credibility on Wall Street.

"I was no longer part of the solution, I was part of the problem," Skilling said. "I was looking at the business with dark-colored glasses."

He told the jurors and a rowful of his family members that included his wife, three children, brother and ex-wife that he was considering teaching, spending time with his family, doing charity work and maybe starting a new business with old friends who had also left from Enron.

Skilling acknowledged that if he had not resigned, it's possible Enron's would not have suffered the "run on the bank" he said occurred a few months later.

"The problem with history is you know what happened, you don't know what could have happened," Skilling said.

He said he left knowing the business was in great shape and he didn't even recall that he'd tried to sell stock in early September, as his broker testified in this trial.

But Skilling said after the attack on the World Trade Center he does recall selling Enron stock Sept. 17, 2001.

"I was concerned about the economy. I didn't know if we were going into a free fall," he said.

He said he had not lost confidence in Enron. Skilling recalled a trip to the the Hill Country with his brother Mark in mid-October, 2001, when the two men went out to the car to listen to Lay's earnings conference call with analysts.

"I was thrilled," Skilling said. "My brother and I high-fived each other."

But he said the next day a series of negative Wall Street Journal stories began, questioning the propriety of Fastow's role with his LJM side companies. Fastow testified that his side partnerships were designed to help Enron hide debt and manage its earnings to fool the public.

The government's basic charge against Skilling and Lay is that they purposefully misrepresented the company's financial health to outsiders to enrich themselves.

Skilling said he called Fastow and told him to tell the whole truth about LJM because the partnerships were totally proper. He said the newspaper stories caused him to worry about Enron's wholesale trading business, which depended on the trust of its trading partners.

"Once this stuff starts, its like a wildfire that unless you can put it out quickly. It can consume," Skilling testified.

Though Skilling's Enron reputation was one of arrogance and volatility, on the stand Monday he was mild-mannered and uncharacteristically humble.

He said "by some huge mistake on the part of Harvard Business School they let me in," and told jurors that he offered to come back to Enron when it was in crisis in October 2001 "not that I'm God's gift to the world or anything."

Skilling said still had contacts on Wall Street and wanted to help Enron in late 2001, telling then-President Greg Whalley in a chat on Skilling's back porch to "warm up the jet." But Whalley decided against that, telling Skilling the company didn't need "one more weird thing."

Feeling powerless, Skilling took a scheduled trip to Florida where he read on Oct. 26, 2001, news story about Enron tapping into $3 billion from its bank credit lines and knew others would rush in to get paid and thus the end was near for his precious Enron.

"I think it's probably fair to say that all I was doing at that time was going to pieces," Skilling said.

Later that day, Skilling said: "It was a little embarrassing, I started drinking. My fiance and I went out to dinner and had some wine and stuff and I just started drinking." He said "I cried. I did not really recover the rest of the weekend."

He described being depressed after he returned home and a friend advising him to get a psychiatrist and a lawyer.

Expecting a "witch-hunt," Skilling said "I committed myself to do everything I could to explain what happened."

"A witch-hunt is irrational people who don't stop long enough to look at the facts. It gets a life of its own," he said

So he talked to the internal Enron board investigators, the Securities and Exchange Commission, Congress and he said he offered to meet with prosecutors but they did not want to.

He said he was surprised when he learned Fastow really was stealing from Enron and "was almost physically sick" when he saw a spread sheet delineating how Fastow would split up the stolen funds.

Skilling also told jurors that Enron was not primarily a trading company but more like a logistics or intermediation company. And he bragged about risk and other controls he said he initiated at Enron as he worked up the ranks.

After court adjourned for the day, Petrocelli said "I feel we accomplished what we set out to accomplish today."

"We'll now start working through the issues in the indictment one by one," he said, predicting direct questioning of Skilling will continue all week.

Meanwhile, Lay's lead lawyer Mike Ramsey left the hospital over the weekend after a carotid artery stent procedure Friday and is at home recuperating. Lay's spokeswoman Kelly Kimberly said they will not speculate on day when he'll return to court.